consumer goods in africa and nigeria
TRANSCRIPT
Copyright © 2013 Accenture All rights reserved. 2
SSA has 12% of the world’s population and only 2% of world GDP: a glass half-empty or half-full?
Sample African Country GDP Growth
(2010 used as base year)
$1.7 Trillion Africa Collective Gross domestic
product
399 Million Number of people between the
ages of 15 and 24
12% Africa population as percentage of
world population
~50 Number of African cities with 1
million+ consumers
Africa Growth Takes Root
2% Africa GDP as percentage of world
GDP
*Source: Africa Development Bank (Low Case Scenario)
Copyright © 2013 Accenture All rights reserved. 3
Images of starving children created a reputation of famine that does injustice to the continent’s potential
Africa has the potential to not only feed itself, but also to become a major supplier
for the rest of the world
Africa as the World’s Pantry
590
300
80
Sub-Saharan
Africa
Latin
America
Others
60%
31%
8%
Arable Land Available
(Million Hectares)
60%
95%
90%
50%
Africa holds...
…of the world’s arable land
…of the world’s platinum metals
…of the world’s chromite ore
…of the world’s cobalt reserves
*Source: Standard Bank. The five trends powering Africa’s enduring allure
Copyright © 2013 Accenture All rights reserved. 4
Alongside its resource potential, Africa is becoming an important consumer market…
Africa in the Future
Before (2010) Future (2030)
US$1.7 trillion Collective GDP in 2010
US$3.9 trillion
Collective GDP in 2030
40% Urbanisation rate in 2010
50% Urbanisation rate in 2030
1.03 billion # consumers in 2010
1.4 billion # consumers in 2030
399 Million # people 15 – 24 in 2010
736 Million # people 15 – 24 in 2030
*Source: Africa Development Bank (Low Case Scenario)
Copyright © 2013 Accenture All rights reserved. 5
Infrastructure
One of the greatest single
problems businesses face
in Africa is electricity supply
and road infrastructure
But the opportunity is far from straight forward; Africa takes risk to the next level
Political Stability
High levels of corruption
and a flourishing illicit trade
will pose unique challenges
to businesses
Foreign Competition
Competition from foreign
consumer companies is
increasing margin pressure.
Supply Constraints
It is estimated that the cost
of transporting goods is 60-
70 percent higher than
developed markets
Skills Shortages
Africa as whole faces dire
challenges in terms of skills
availability
Shifting Landscapes
Factors such as
urbanisation create a
situation where RTM are
continuously shifting
Africa
Risks
1
2
3 6
5
4
Africa Risks
Copyright © 2013 Accenture All rights reserved. 6
These challenges severely impact the cost of business. Indirect costs erode profitability.
0
2
4
6
8
10
12
0
2
4
6
8
10
12
0
2
4
6
8
10
12
0
2
4
6
8
10
12
0
2
4
6
8
10
12
Indirect Costs as Percentage of Total Sales
Nigeria India Brazil China South Africa
Legend: Electricity Bribes Transport Disruptions Theft and Robbery
Indirect Costs
Source: World Bank – Nigeria Investment Climate 2011
Russia
0
2
4
6
8
10
12
11.5% 10.5% 5.5% 4.9% 4% 2.2%
Copyright © 2013 Accenture All rights reserved. 7
Among the four sub regions, West Africa has recorded the highest growth, followed by the East
Regional Differences
-2
-1
0
1
2
3
4
5
6
7
8
2008 2009 2010 2011 2012 2013
West Africa
East Africa
SSA
Southern
Africa
Real GDP Growth (%)
Source: IMF Database
Central
Africa
West Africa
7% expected GDP growth in
2013
Southern Africa
3.8% expected GDP growth
in 2013
East Africa
6% expected GDP growth in
2013
Central Africa
5.3% expected GDP growth
in 2013
South
Africa
Copyright © 2013 Accenture All rights reserved. 8
Within each of these regions, 9 key markets show the largest potential for future consumer goods growth
Our analysis shows that nine African
countries will comprise nearly three-
quarters of total consumer spending in
sub-Saharan Africa by 2020
Kenya
Nigeria
Angola
Ghana
Zambia
ECOWAS
EAC
SADC
Focus Countries Population
2010
GDP
Growth
2015
2020
Consumer
Spend
Kenya 40m 6.4% $ 37bn
Ethiopia 83m 5.5% $ 43bn
Uganda 33m 7.9% $ 30bn
EAC & COMESA
Nigeria 151m 7.4% $ 167bn
Ghana 24m 13.2% $ 29bn
Senegal 13m 4.6% $16bn
ECOWAS
South Africa 49m 4.1% $ 315bn
Angola 19m 8.1% $18bn
Zambia 13m 7.1% $ 23bn
SADC
Ethiopia Uganda
South Africa
Senegal
*Eastern Hub includes COMESA countries that are not covered in the Southern Hub EAC: East African Community; COMESA: Common Market for Eastern and Southern Africa ECOWAS : Economic Community of West African States SADC: Southern African Development Community
*Source: Euromonitor
Key Markets
Copyright © 2013 Accenture All rights reserved. 9
Nigeria is a rising star among these countries and is expected by 2020 to be the largest economy in Africa
GDP Growth (Constant 2000 Prices)
$268bn GDP in 2012 (Current US$)
$11.2bn Estimated FDI in 2012
7.0% Forecasted 5 year compound annual GDP growth rate
12.1% Average estimated inflation for 2012
-4%
1%
6%
11%
16%
21%
2000 2002 2004 2006 2008 2010 2012 2014
Asia
SSA MENA
LATAM
Advanced Economies
Nigeria
Nigeria Facts
24.2% Estimated unemployment in 2012
17.6% Estimated lending rate in 2012
166M Population in 2012
Nigeria Deep Dive
Copyright © 2013 Accenture All rights reserved. 10
Underlying the growth in these countries are key cities acting as hubs of commercial activity
Africa Biggest Cities
Lagos
(11.7m)
Abidjan
(4.5m)
Luanda
(5.5m)
Kinshasa
(9.9m)
Cape Town
(3.5m)
Johannesburg
(3.8m)
Nairobi
(4.0m)
Addis Ababa
(3.8m)
Cairo
(11.4m)
Alexandria
(4.6m)
Key Cities
Lagos is a megacity
within Africa boasting a
population of over
11.7m
Nairobi is arguably the
best-connected city on
the continent in terms
of ICT
Accra in Ghana was
recently flagged by
MasterCard as next
growth hub of Africa
Addis Ababa hosts the
African, headquarters of
almost every major
multilateral organisation
Copyright © 2013 Accenture All rights reserved. 11
There are over 2100 and
by some counts over
3000 languages spoken
natively in Africa
Within these markets consumers are divided between numerous ethno-linguistic groups and religious lines
Africa has four main ethnic
groups: Arab, Ashanti,
Bantu and Swahili
Africa Diversity
In Africa, there are 3
major religions:
Traditional, Christian and
Islam
Copyright © 2013 Accenture All rights reserved. 12
Despite these differences, our research reveals five broad key consumer groups
Basic Survivors
Affluent
Working Families
Cosmopolitan
Professionals
Rising Strivers
Key Consumer Segments Basic survivors are the
majority group in Africa and
tend to live in urban slums
Working families focus their
spending on their children’s
needs
Rising Strivers emerge from
the first two segments and are
highly aspirational
Cosmopolitan Professionals value pragmatic products but are also brand conscious and influenced by media
The affluent have
disproportionately high
income and are driving a new
luxury market in Africa
Copyright © 2013 Accenture All rights reserved. 13
Rising Strivers and Working Families will be the primary drivers of consumption growth
* Source: Canback 2010, Accenture Analysis
Segment Population Evolution
Africa Population Evolution
2010
51%
31%
13%
3%
2%
Basic Survivors
Working Families
Rising Strivers
Cosmopolitan Professionals
Affluent
66% 54% 51%
45%
21%
29% 31% 33%
9% 12% 13% 16%
2% 3% 3% 3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2005 2010 2015
Affluent Cosmopoliton ProfessionalsRising Strivers Working FamiliesBasic Survivors
2015
45%
33%
16%
3%
3%
Copyright © 2013 Accenture All rights reserved. 14
Growing economies and aspirational drive in Africa is creating a booming entrepreneurial culture
Source: Global entrepreneurship monitor 2012 survey
Entrepreneurship is seen as a good
career choice by 76% of people in
SSA (vs.59% in the Asia Pacific)
Furthermore, 70% of people in the
region (as high as 82% in Nigeria)
believe there are good opportunities
for starting a new business
However, most of the new ventures
are still mostly low margin and
survival entrepreneurship (e.g. small
vendors)
As a result, the region has the
highest percentage of new
entrepreneurs in the world
Africa Entrepreneurship
Percentage of Population Starting or
Running a new Business in 2012
13%
8% 8%
28%
35%
15%
7%
0%
5%
10%
15%
20%
25%
30%
35%
40%
US EU MENA SSA Nigeria Ethopia SouthAfrica
Copyright © 2013 Accenture All rights reserved. 15
Distribution Flow Returns and Funds Flow
Sales to distribution Sales to trade Sales to consumer
Consumer
Manufacturer
Wholesalers
Formal Retail
Open Markets
Corner Shops/ Kiosk
43%
55%
2%
98%
Source: Gain, Euromonitor
Nigeria FMCG Trade Structure Example
This entrepreneurial drive has resulted in a unique informal trade structure
Copyright © 2013 Accenture All rights reserved. 16
You often hear about great African expansion growth stories …
Shoprite is the largest food retailer on the African continent
(operating upwards of 130 stores in 16 African countries)
Indomie, an Indonesian brand of instant noodles, struggled to meet
due to challenges associated with importing raw materials. The
company integrated backward, developing local manufacturing
capabilities for all raw materials. Due to its ability to respond quickly
to local demand, Indomie has captured 70 percent of the Nigerian
instant noodle market
From its South African roots, it operates in 21 countries in Africa
and the Middle East. To gain market share among low-income,
rural Africans, MTN has made it easier for them to buy and use
airtime, enabled its agents to reach remote areas, and created
smaller airtime denominations.
•
Africa Success Stories
Copyright © 2013 Accenture All rights reserved. 17
But, what you don’t often hear about, is the business failures that have occurred …
Prominent retailer abandoned
100 stores in Egypt. It is
estimated it was losing over
$50 million a year
Large telecoms operator
sold its operations at a loss
of $70m after its east
African entry in 2008
Large global brewer exits
Kenyan market after only
year of entry due to stiff
local competition
Global media house,
pulled the plug on its East
Africa division because of
low return on investment
Fast food chain closed its
outlets in Kenya amidst stiff
competition from local players
Large telecommunications
acquisition ended up
costing the company over
$695m in losses
Africa Failures
Copyright © 2013 Accenture All rights reserved. 18
Tapping into the hidden wealth offered by the African consumer markets requires a mind-set shift
Innovation is Key
• Ten, fifteen years ago,
many multinationals could
rely on stripped down
products to earn revenue
in Africa because scarcity
of competition and novelty
made the sale
• Today, understanding
Africa’s consumers' unique
cultural requirements and
adapting your products
and operating models are
key
Key Success Factors for Breeding
Innovation and Success in Africa
Cost Advantage
Local Talent
Local Decision Making
• Build scale
• Practice lessons from frugal innovation
• Leverage local talent
• R&D centres closer to your consumer markets
• Empower local decision making
• Integrate local and corporate strategies
Leveraged data
• Analytics help your sales force, distributors
and product development decisions
Copyright © 2013 Accenture All rights reserved. 19
10 Traits of Master Innovators – South African Research
0%
10%
20%
30%
40%
50%
60%O
ve
rall
ind
ex
sco
re
Pro
ce
ss o
fIn
no
va
tion
En
gag
em
en
t
Re
so
urc
es
Fore
sig
ht
Cu
sto
me
rV
alu
e
Ta
ng
ible
Be
nefits
Inte
gra
tion
Org
an
isa
tio
na
lE
co
log
y
High performers
Rest of SA market
Copyright © 2013 Accenture All rights reserved. 20
Different strokes for different folks…
Strategy Execution
Market
Focus
Value
Proposition
Market
Entry
Strategy
Sourcing/
Manufact. Distribution Marketing
Trade &
POS
1 2 3 4 5 6 7
Do we
understand
our target
market?
Do we
have the
right
product/
service to
offer?
How do
we enter
the market
with
minimal
risk?
Do we
source
locally or
import?
How do we
reach our
customers?
How do we
ensure that
there is
demand for
our
product?
How do
we
manage
the point
of sale?
Copyright © 2013 Accenture All rights reserved. 21
Selecting and entering African markets requires on-the ground knowledge and local partnerships
Strategy – Levers for Breakthrough
Market
Focus
Value
Proposition
Market
Entry
Challenge Insight
Walk the markets
and gain insights from
talking to street vendors
and observing
consumers
Beware of your home
country biases, ensure
to adapt products to
local tastes and cultures
Assess your own
capabilities and market
requirements to
determine if you should
partner or go it alone
Traditional market
research is very limited
and public data may be
unreliable or outdated
Significant cultural
differences within and
across markets creating
distinct consumer needs
Significant entry barriers
in terms of political, legal
(e.g. ownership
structures) and financial
(e.g. repatriation)
Copyright © 2013 Accenture All rights reserved. 22
Operating in Africa is challenging, but several companies are innovating to be successful
Strategy – Levers for Breakthrough
Sourcing
Distribution
Marketing
Challenge Insight
It is essential to develop
local partnerships for
local sourcing and
production
Use local networks and
leverage the use of low
cost pushcarts, trolleys
and motorcycles to get
close to the consumer
Direct personal selling in
the informal sector are
key. Promotions that are
community based will
gain more traction
Ports are hopelessly
congested. Imported
materials can account
for almost two thirds of
final costs
Informal trade dominate
the retail landscape with
narrow gravel roads
where trucks can’t enter
Traditional print and
media don’t always reach
the masses. Community
endorsement is a key
driver for the purchase
Copyright © 2013 Accenture All rights reserved. 23
Accenture’s Africa Desk can provide practical insight to help you craft these creative offerings and solutions
Our Offering
Structure
What is the most
effective way to
structure and
setup?
Strategize
How will we create,
deliver, and
capture value?
Assess
Which growth
market to enter?
Implement & Run
How will we
control, direct and
partner to execute?
Accenture
Offering
Growth
Market
Assessment Business
Model Design
M&A
Execution
Managed
Services
Capacity
Services
Roadmap & Financial Case Development
Market Entry
& Due
Diligence
Operating
Model Design
Outsourcing